National Labs Report on RPS Costs and Benefits

By Galen Barbose, Lawrence Berkeley National Laboratory
June 24, 2014

A new report by the U.S. Department of Energy’s Lawrence Berkeley National Laboratory and National Renewable Energy Laboratory summarizes the impact of renewable portfolio standards (RPSs) at the state level.

The report, “A Survey of State-Level Cost and Benefit Estimates of Renewable Portfolio Standards” draws upon a variety of data sources, including estimates developed by utilities and public utility commissions as well as renewable energy certificate pricing, to summarize the net costs incurred by utilities to comply with RPS requirements. It also surveys recent studies that have assessed the magnitude of potential broader societal benefits.

Key findings from this study include the following:

Among the 24 states for which the requisite data were available, estimated RPS compliance costs over the 2010-2012 period were equivalent to, on average, roughly 1 percent of retail electricity rates, though substantial variation exists across states and years.

Expressed in terms of the incremental (or “above-market”) cost per unit of renewable generation, average RPS compliance costs during 2010-2012 ranged from -$4 per megawatt-hour (i.e., a net savings) to $44 per megawatt-hour across states.

Methodologies for estimating RPS compliance costs vary considerably among utilities and states, though a number of states are in the process of refining and standardizing their methods.

Utilities in eight states assess surcharges on customer bills to recoup RPS compliance costs, which in 2012, ranged from about $0.50 per month to $4.00 per month for average residential customers.

Cost containment mechanisms incorporated into current RPS policies will limit future compliance costs, in the worst case, to no more than 5 percent of average retail rates in many states and to 10 percent or less in most others.

A number of states have separately estimated the value of RPS benefits associated with avoided emissions (ranging from $4 to $23 per megawatt-hour of renewable generation), economic development ($22 to $30 per megawatt-hour), and/or wholesale electricity price suppression ($2 to $50 per megawatt-hour).

Important caveats and context for the findings cited above are explained fully within the report, which can be freely downloaded online: 1.usa.gov/1hDXYli. Funding support came from the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy (Strategic Programs Office and Solar Energy Technologies Office).